September's 10% decline in pending home sales was significantly worse than anticipated

According to the National Association of Realtors, the number of contracts for existing properties that have been signed decreased by a far worse-than-anticipated 10.2% in September from August.

A 4% reduction was what economists had projected. Sales decreased 31% over the previous year.

The pending sales index hasn't been this low since June 2010, excluding April 2020, when the Covid epidemic was just getting started.

Realtors directly blame the pandemic's first two years' record-low mortgage rates, which have since risen substantially. According to Mortgage News Daily, the average rate on the popular 30-year fixed mortgage was exactly around 3% at the beginning of this year, but it quickly increased and crossed 6% in June. In July and August, it somewhat declined, but it soon started to rise once again, topping 7% in September, the month these contracts were signed.

NAR Chief Economist Lawrence Yun stated that "persistent inflation has been highly damaging to the housing sector." The Federal Reserve had to dramatically boost interest rates to control inflation, which led to a significant decline in both buyers and sellers.

Because homeowners are hesitant to give up their record-low interest rates in exchange for a substantially higher one, mortgage demand and new listings are also declining. For prospective buyers, the rise in rates means that, with a 20% down payment, the monthly payment on a median-priced property is now over $1,000 more than it was in January.

Buyers' purchasing power has decreased by almost $100,000 as a result of increasing rates and declining salaries, according to George Ratiu, a senior economist at

"As we consider the rest of the year, we may anticipate that interest rates will keep rising. The Federal Reserve is projected to raise its policy rate further since its monetary tightening has not yet reduced inflation, he continued.

Red-hot housing prices are beginning to cool and even shrink in certain local markets, but the dip is insufficient to offset the rise in interest rates. Due partly to those historically low borrowing rates in the early stages of the pandemic, home values have increased by more than 40% since the outbreak.

Regionally, pending home sales in the Northeast fell 16.2% from one month to the next and were down 30.1% from one year ago. Sales in the Midwest were down 26.7% from a year ago and 8.8% for the month.

Sales decreased by 8.1% in the South for the month and by 30.0% over the previous year, while sales were down by 11.7% in the West, the most costly part of the country, for the month and by 38.7% over the previous year.

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